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tv   Worldwide Exchange  CNBC  September 19, 2013 4:00am-6:01am EDT

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you're watching "worldwide exchange." i'm ross westgate. your headlines today from around the globe, the fed surprises everyone by deciding fought to taper its bond purchases. they have left the door open for future moves. >> the data confirm our basic outlook. we have more confidence in that outlook and we believe that the three-part test that i mentioned is indeed coming to past. then we could move later this year. >> stocks here in europe rally,
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as well. basic resources leading the way. gold initially striekd by more than 4% on the back of the fed. and a no taper move translate into the emerging markets. currencies like the rupee surge in countries like thailand and indonesia. and stocks get the eurozone, more protests expected in greece after the murder of a 34-year-old rapper brought violent clashes. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. >> all right. we're up and running here on "worldwide exchange." big global reaction to the fed. it says it's not ready to cut back just yet, deciding not to taper its massive bond buying program the markets had been expecting. in its statement, the fed cited
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tightening financial conditions that could hurt the u.s. economy and labor market. the fomc notice dollars the impact of rising mortgage rates which have surged since the fed hinted this summer that it might trim its bond purchases. the federal reserve blamed washington for moving towards a potential shutdown. in his press conference, ben bernanke says the fed could still taper before the end of the year depending on whether growth and the pace of hiring improve. >> there is no fixed calendar schedule. i really have to emphasize that. if the data confirm our basic outlook, if we gain more confidence in that outlook and we believe that the three-part test that i mentioned is indeed coming to pass, then we could move later this year. we could begin later this year. but even if we do that, the subsequent steps will be dependent on conditioned progress in the economy. so we are tied to the data.
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we don't have a fixed calendar. >> the fomc cut its forecast for the third time. although it's still expected to pick up in 2014 and '15 and believes unemployment could fall to below 6% by then. massive global reaction ahead for investors that had priced in. of course, a spike higher in yields. right now on the dow jones stoxx 600, nine to one. we're about 1% higher right now. this follows the s&p up at fresh record highs, the nasdaq up at a new 13-year high post that decision yesterday. right now in europe, the ftse was down about 11 points yesterday, up 94, 11.5% higher. the dax up at fresh record territory, cac 40 up 1.2%. ftse mib up 1.3%. the biggest impact has been in emerging markets. commodities moved spot gold.
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1,370. brent up marginally, not an awful lot, 110. as is nymex, although it did move yesterday during the u.s. session. a lot of these commodities do see what's happening with the dollar. the dollar index down at seven-month lows and that's been predicated by the fact we've seen a sharp drop in yields, as well, on treasury. 10-year tre treasury yields, 2.7%. we were 2.6% before the fed came out with this afounsment. we got yields down to 1.67% on monday. gilt yields were nudging 3%, current by back down to 2.8% on that and spanish yields down to 4.32%, as well. those lower yields helping to drive the dollar lower, as well. dollar down at seven-month lows on the index. 1.3549 is where we stand. 7 1/2 year high for euro/dollar
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on that level. dollar/yen, 98.86. a drop in u.s. yields should mean the dollar gets sold out, but of course there's an increase in risk appetite. sterling/dollar, 1.311. aussie/dollar up to 0.95, as well. that's where we stand over this trading session here in europe. let's recap what's happened in asia and sixuan has got that. >> thank you, ross. asian investors cheering the fed's decision to maintain the pace of the bond purchase. major bourses are higher today and some of these emerging markets are soaring. although some sensitive current counters were kind of out of favor today given the yen is still trading below the 99 the handle. the nikkei 225 still close at its eight-week high helped by financials, real estate and
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resources counters. meanwhile, shanghai, taiwan and south korea is out of action today and the hang seng is trading up against the public holiday tomorrow, ending higher by 1.7%. it has now recouped all the losses since may when bernanke announced the tapering. in the meantime, south korea and indonesia making big jumps. india's rupee, indonesia's r rue pea ya are gaining from 1% to 2% against the green back.rupiah a% against the green back. australian gold miners also clocked in double digit gains. laser gold and kingsgate both jumped over 15%. these hong kong listed blue chip
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banks gained some over 2% in today's trade. back to you. >> all right. sixuan, thanks very much indeed for that. that's been the global market reaction in summary. joining us with his thoughts, head of strategy at ing investment management for the first part of the program today. i think everybody is surprised. why -- first of all, why did we get the analysis wrong? and then why, in your opinion, have the fed not done anything? >> well, i think indeed, the self-reflection on why there was such a massive consensus that they would and, clearly, they had very different opinions. it's interesting for investors. apparently we haven't really understood how the new game plan, the strategic game plan is working within the fed. and i think that also is very -- an important reason why they exit, because bernanke felt he
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was clear in communicating to the market. >> he clearly wasn't. >> examine clearly the market didn't understand him well enough. they tried to off the announcement in may. they tried to verbally convince the market that they had still a strategic game plan of being really easy and much more easy than in the past given a certain set of economic conditions. however, by now, i think it became clear for the fed that actions or maybe no actions speak louder than words. and they needed to move. they needed to make a move in terms of actions rather than just talk. and i think that's why the buying. >> the problem here is that, you know, wa they're doing is not binary. the problem here is actually markets are binary. you're either buying or your selling. >> yep. >> i mean, yields are either going up or they're going down. >> yeah, i know. and i think that is exactly the mentality that he's grappling with. he's trying to fight that expectation set that as soon as
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he moves in a certain direction, we extrapolate the move and we start anticipating additional moves. if he reduces easing, we anticipate tightening. and that's wa he's fighting up against. you can never win that battle, can you? >> well, you know, in the end, you always have to take into account. and we're looking at broad financial conditions. if these broad financial conditions tighten enough, that will influence exactly what the fed said. that feeds back into their actiones and thereby hopefully caps the anticipation in the future of markets in anticipating future highs. >> well, look, larry joined the course of the price surrounding that decision. in his interview of cnbc he warned of a potential bubble now in bond markets. >> i'm surprised because i think at the same time the fed i thought was going to be tapering, the treasury was going to start reducing its issuance. what i'm worried about now is
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the fed is -- is going to be buying more than 100%, maybe 110% or 120% of all debt issuance. i think that's going to create more of a double issue in the future and it's going to make it more difficult to unravel this. >> now, there may be economic reasons for not exiting qe because of a big drop in the participation rate and unemployment in the economy looks fairly weak. one of the reasons for exiting may be because the risks outweigh the rewards. how real is that fear? >> well, it is a realistic fear, in the sense that especially conditions outside of the u.s. which are not part of the mandate that the fed has have become clearly very dependent on what the fed does. and we have seen that in emerging markets. we're seeing that today and yesterday evening in the response of emerging markets to these moves. there is encode a risk that a lot of these markets have had accepted credit raegz and are at
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risk of having some form of a bubble if this loss. >> where are we now? yellen is perceived as taken over and she's more dovish, whether that's right or wrong on. >> at least she's not more hawkish. i think in that sense, would he want to taper on his last meeting if that's what he thinks he has to do? i have no doubt. but he could very much do it the last time around. the other thing that was clearly worrying the fed, if we hold debate about the deficit and the debt ceiling and the political battle, which is clearly quite aggressive and there is very far away from some kind of resolution in capitol hill. and i think once we get some transparency on that or some
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kind of solution, the fed will be starting to ease. >> 2 1/2%, i think that's the biggest since the korean war. you're with us for about an hour or more and find out what analysts think the fed move will re-ignite talk of currency wars. head to our website for more on, cnbc.com. follow us on twitter@cnbcworld. kwens coincidentally, it's also national talk like a pirate day in the u.s. today. we thought what would mr. bernanke have thought about the fomc's decision if he were a pirate and had to talk like a pirate? i thought he was probably go along the lines of throw out the rum punch or more rum punch for everybody. e-mail us, world would it@cnbc.com, tweet @cnbcwex or direct to me @rosswestgate.
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>> throw out the rum punch from the helicopter maybe. >> there we go. i don't think they had helicopters at the time of pirates, though. >> maybe not. >> or slice the main sail or something. send us yo ur thoughts on that whatever it may be. i think we just did it because we like the idea of ben bernanke in a pirates outfit for some reason. now, in corporate news, shares seemed to be unaffected by a court stake sale. the court has temporarily blocked the sale back to the u.s. gamesmaker after an activisionmaker filed a lawsuit last week seeking an injunction to the transaction unless it is put to an investors vote. stephane has been following the news and the reaction and he joins us with more. >> the shares are now trading lower. you're right, it's a limited
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reaction to this announcement yesterday. the deal is not going to be canceled. vivendi and activision were clear about it yesterday. but it is a delay and it will delay the french group from a conglomerate to a smaller media focused on its television and media activities. what happened yesterday? the court blocked the action by vivendi. back in july, it agreed to sell most of its stake in activision for $8.2 billion. but last week, the main shareholder of ac at thisvision claimed that the deal could not be completed without a vote of the shareholders and that's what the court confirmed yesterday. in a statement, ac at thisvision confirmed it's committed to the transition. it's exploring all the steps that it will have to take to complete the deal as quickly as possible. so probably we'll have very shortly a vote of the shareholders. but in the meantime, for va have
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beendy, it's delaying the transformation process. last week, vivendi launched an official study with how to complete the study. so until further notice. vivendi has to focus on this activation story before going forward with a split of the company. >> stephane, thank you very much indeed for that. meanwhile, the release of grand theft auto v breaks records. the graphics on this are pretty intense. take two interactive flat. it's been up 9% in the last three months. stim to come on today's program, germany's anti-eu party
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is now securing 5% and a new poll will be on the ground in berlin. could this scuttle merkel's leadership of the eurozone crisis? plus, is abe sold on a sales tax? we'll get the latest on a sales tax as the jaep niece government continues its attempts to end deflati deflation. and emerging markets are indeed a beneficiary of ben bernanke's decision not to taper. plus, expectations may have been low, but oracle's first quarter earnings still better than expected. the software giant, though, did say it's still cautious. we'll be joined by guests who thinks the company is just being prudent. and what would you ask bernanke if you had the chance? we'll be joined by greg ett who was at yesterday's press conference. we'll have the inside track before 12:00 cet. plenty more to come on today's "worldwide exchange." [ tires screech ]
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we're got some pictures out of egypt where security forces are hunting 140 people on an area in the outskirts after 11
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policemen were killed on an attack at a police station last month. troops have been surround ago tent which is thought to be an islamic strong hold. they've been exchanging fire with suspected militants would killed a senior police officer. we'll keep our eyes on that. meanwhile, in greece, as well, violent crashes have broken out after a 34-year-old rapper and activist was killed who sympathizes with the far right party. the death of pav lo v has brought widespread condemnation from leaders. on the german campaign trail, we've been asking people for their take take on the crisis in peripheral europe.
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>> at the moment in countries like greece and portugal, we see lower growth and higher unemployment. in some countries, you see youth unemployment is more than 50%. lower tax revenue, agencies come in and downgrade countries and the vicious cycle starts again. the wave is disastrous and it caused additional economic and social costs for taxpayer citizens. we're currently on a good path on those country that's received bailouts. that's why it's right to stay with what has been dpraed, no new debts and the necessary structural reforms. >> if you come to a situation where a country has huge problems and the national government is not able to finance the rescue program, i think it's better to use a -- instead of barely any
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depositors. >> the southern european countries should leave the euro because we have proven not to be competitive and the alternative for them would be decreased in wages of about 30 percentage points. >> as the german relation campaign reached its final stages, they link support for the european party. they have been on the campaign trail and joins us for more in berlin. >> these polls showing they've got 5%, how crucial might that be in the time count, annette? >> actually, if they are getting 5% and as it looks right now, they are taking voters away from the christian democrats, at least if you're looking at the latest poll, that would mean that angela merkel's no coalition with the cdu and the
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fdp would no longer make it to a majority. which would essentially mean it will head into a situation where we have a grand coalition. but more importantly is that if the afd, the anti-euro party here in germany is making it into parliament, we have a lot more anti-euro debate afterwards as well as in parliament and developly they might as well be more reluctant to sign up for more bailouts in the eurozone. one of my guests early on was saying that could be one of the outcomes of the afd having seeds in the parliament. on the other side, one has to say they can't really block anything because of the ten seats or so they are not in a position to block anything because the government would then be composed with a good majority. but again and again and again the discourse might be a bit more anti-european if we have the alternative for germany inside the parliament.
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>> the afd might get more votes now than expected through that poll because a lot of people would not diabetic rattly say they're going to vote in favor of them, but then again could do so. annette, stay with us. cnbc will have full coverage of the elections tomorrow and monday from 600 cet. we've got our team there, as you can see, ready to report on it. valentine, as far as the eurozone crisis is concerned, a lot of people said all the big decisions will be delayed until after the german elections. i'm wondering if anything is going to change after the german elections.
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>> for a long part, i agree with you. it doesn't mean that nothing will happen in the rest of europe or in, let's say, restructuring europe. i think some reforms will persist in the south in portugal, spain and greece. and i think a banking union will gradually be built. these are in the right direction. >> actually, if you're saying it's slow moving into the right direction, do you think the germans will subskriep or sign any deal that gives more liabilities towards brussels, i.e. the banking union? i rather doubt it. what's your take here? >> well, they will be very hesitant. have become more hesitant over the last 6 to 12 months. but i think in the end they will find some form of a compromise.
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that is pretty clear. i think the debate currently about the banking union is not really that critical. it doesn't look like it's falling apart anytime soon. and the overall sentiment surrounding the euro crisis is no longer a crisis, it's more a gradual process which needs to be managed which will have some bumps along the road. but in the end, i think there will be some form of a banking union. that is what the debate will be about. and although not perfect, it will be an improvement from where we started a couple of years ago. >> it looks like there may be some bailout for greece, portugal. >> it's basically agreed upon in the leaders in the north. the dutch seem to be open to it and they'll find some sort of a solution. >> thank you. still to come, emerging markets
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have been the big one in the fed's decision not to taper. should the central bank consider that when deciding policy?
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. the fed surprises everyone by not tapering bond purchases. >> the data confirmed our basic outlook. we gained more confident in that outlook and we believe the three-part test that i mentioned is indeed coming to pass. then we could move later this year. >> stocks in europe continue the global rally. basic resources leading the way, as well. currencies like the rupee and rand rallied back strongly. >> another bit of data out on of the uk, retail sales, it's the first bit of data for a while that's weaker than expected. surprisingly weak in august as
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consumers reigned in spending. retail sales volume down 0.9% on the on month. this is wrong for economists who expected it to rise 0.4%. the annual rate of growth slowed from 2.1% from july's 2 1/2 year high of 3%. they say the july figure was boosted by a heat wave which lifted sales of barbecue food and outdoor items. it's providing additional reasons to splash out. food sales down 2.7% on the month of awl august. which fully reversed july's gains. of course, we've had rising house prices, record low mortgage rates and an economic recovery given consumer spending something of a boost, although retailers always putting something of a cautious note on that. sterling/dollar, dipping down to the session low on the back of that. as i said, it's the first sort of worse than expected economic dey data we've had out of the uk for quite some time. we did get up to 1.6184 post the
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fed dipping down now to 1.6086. taking nearly a full cent off the price. we've got uk car production in august, though, on the other hand, up 16.2% on the year according to the society of motors and manufacturers. so you take the uk component out of the eu ones, and those composite numbers would be a lot weaker. but as you said, the retail sales is the biggest fall since october 2012.
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bond markets, we saw a big surge in bond prices and the lowering of yields. treasury yields, 2.7%. we did get down to 2.67% late yesterday, which is a one-month low to the yields. we were above 3% after the employment report two weeks ago. gilt yields, they were above 3% yesterday post the bank of england minutes, which we'll want to see in this. and on the currency markets, the dollar has been down to seven-month lows this morning. the euro up to 7 1/2 month high because of the greenback. we're currently on that level at the moment, 1.3563. dollar/yen, a little bit conflicted. on the one hand, you want to pull the dollar lower. on the other hand, it's risk positive so you want to push the dollar higher against the yen and sterling we've talked about, as well. that's all after expected, as well. the biggest beneficiary has come from emerging markets, dropping currencies like the rupee and rupiah are dropping sharply.
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the rupiah, we were up near 70 just a week or so ago. the dollar/rupee, down 1.65. many, of course, have criticized the u.s. fed for not factors the impact of its actions on emerging markets, although ben bernanke says that just isn't the case. >> we think it's very important that emerging markets grow and are prosperous, we pay close attention to what's happening in those countries. it affect tess united states and i think my colleagues in many of the emerging markets appreciate that not with standing some of the effects that they may have felt, that efforts to strengthen the u.s. economy and other advanced economies in europe and elsewhere ultimately rebounds to the benefit of the global economy, including emerging markets, as well. >> that is ben bernanke last night in the press conference. joining us from hong kong,
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steven short. valentine is with me still in the studio. steven, good to see you. look, it was a -- the knee jerk reaction would be after a lot of people taking money out, they're going to reverse those trades and say, you know, buy, buy. how long does it last? >> well, i think the fed has postponed the inevitable. so it's not going to last forever, obviously. and if there's anything good about this sort of head fake is it's given central bankers and governments in the emerging markets a dry run, if you will, to see what needs to be done and how to respond when the tapering actually does take place. which it will and which had which the fed has signaled is coming towards tend of this year. >> it makes rajaratnam look like
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a genius. i used to work with him at the imf and he is somewhat of a genius. but one person won't be enough to turn around india's woes. the fed decision to postpone tapering takes the pressure off the rupiah. but india needs a lot of help on the government's side in terms of structural reform toes remove supply bottlenecks and help get their current account and fiscal deficit under control in order to boost longer term growth back up where it needs to be. >> yeah. i mean, look, in the early '90s, the economy got so bad that they had no choice but to embrace structural reforms. i just wonder whether things have got bad enough yet for the politicians to do something similar this time around. >> that's a good point. a silver lining of crisis and it applies in the region to india or indonesia or a host of other countries is that it really
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creates the momentum for reform. when times are good, governments sometimes relax and don't take, of course, the politically difficult reform. so i think with this episode, it is certainly reinvigoratining o the government's side. next year is an election in india, so next year it's not -- by any stretch of the imagination. >> do you think that we are really already there? you're right, often this crisis creates momentum for reform. but looking at not only india, but also some of the other big emerging markets, having elections not too far off and our impression is, really, that this reform momentum has not really started to build, despite the fact that we have the turmoil in markets. and maybe even that momentum further once we have now a bit of ae leaf on the fed. >> well, you have to look at the situation country by country. here in asia, the two economies
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that have been hit hardest during this period of expected fed tapering are certainly india and indonesia. in both cases, i think we see evidence that the reform momentum has improved under these conditions. in indonesia, the government has announced a series of measures to curtail the current account, the widening current account deficit over the medium term and to try to reverse some of the more protectionist and nationalistic policies in investment and in the mining sector, for example. but it's not a sea change, by any means, and indonesia faces elections next year. so i think it's sort of -- we're in the middle point of reversing some of the negative trends that were entrained, but not a full fledged reversal quite yet. good point. >> yeah. and just stay there, as well. maria has been speaking to larry fink, of course, from blackrock who thinks we're going to see ee more flows into emerging
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markets. listen to what he had to say. >> starting about two weeks ago, we saw about $5 billion of inflows in our emerging market equity. so we began to see stabilization. and i'm sure tomorrow we're going to even see more flows into emerging markets. but i -- you know, i thought the market was now equalizing from what information they had. and that's why i thought the fed had the ability to do a modest amount of tapering and giving modest guidance and the markets would have been fine. >> what do you think of that? now actually are we going to get too much flow coming back? >> yeah. you know what? one of the things we've been flagging for the outlook for emerging markets in terms of the risks is a disorderly adjustment to central bank tight.ing in the u.s. and we saw bouts of that in the volatility. and i certainly do think markets had overshot a little bit
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because the long-term fundamentals of some of on these economies are very sound. periods like this certainly expose the weaknesses on the structural side and they limit the scope for policy error in emerging markets. so there was some overselling crisis like this. i wouldn't even call ate crisis, but a substantial portfolio adjustment like this does give rise to investment opportunities. and so i think there are some investment opportunities in terms of on oversold currency and equity markets. but again, investors need to keep in mind that this is really just a delay of the inevitable that the tapering and the fed tightening will come eventually and emerging markets do need to prepare for that as to investors. >> but then again, your point next to the influence of the fed and on the overall market sentiment and willingness to allocate capital in the emerging space, your point about the soundness of long-term fundamentals i would argue is also under question, especially
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with respect to the competitiveness of a lot of big emerging markets and their come pencety to supply earnings growth, to move to a more driven domestic economy and probably the need to have substantially more, let's say, easier currency of exchange rates. i think provide a lot of challenges. so i would question whether you can say the underlying fundamentals are still sound. we have the full ability around the fed, but in the long-term, the eem story is still there. i'm wondering whether we should be so comfortable about em in that. >> well, here, i do think the long-term fundamentals of many of these emerging markets is sound. and i was struck by just how pessimistic some investors had become during this recent sell-off about the long-term fundamentals. but in many of these economies, such as indonesia and understand
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use, the demographic res favorable. we have rising middle classes, the countries are positioned geographical and the world's highest growth region. and in my mind, there's no reason why over the coming decade countries like india and indonesia cannot continue to grow at very rapid rates as long as they get the policy framework right. i certainly do think it's true that the enthusiasm may have been overdone with the flows coming in. a lot of it behind the liquidity of central banks. and that may have given rise to some currency overvaluation that may have undermined competitiveness at the margin. but i firmly believe that the fundamentals in these economies over the coming decade is still sound. >> okay. steven, good to see you today. have a good evening. actually, you're going to stick around for a little bit more. sorry, steven.
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and we just got a bond auction out of spain. the three-year is interesting. they sold the maximum amount of that in 2016. the yield, 2.24%. it was 2.65% on august the 1st. so quite a bit of a drop in yield. they also saw 2028 bonds. the maximum on that, 4.82%. first on the reopen that for syndication. no comparison. there we go. your six weeks, the yields come down, sort of 40 basis points at auction. >> well, so maybe we are indeed solving the euro crisis. who knows. i think indeed one of the key factors that is at play here is that it's no longer in the top three list of worries of global investors. and that alone generates these types of yield levels, thereby it's providing growth. >> i'm sure that was helped by the fact this comes after the fed. we go and buy yield again. >> absolutely.
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and this is one of the areas within fixed income which is more challenged with a rising appetite for equities. this is one of the areas where if you look for a bit of risk and a bit of yield pick up, the opportunity is there. a fed move increases risk appetite. where do you look in 20167? you look for peripheral bonds. >> that's the latest on spain. now, it is -- there we go. that's the latest yield. right. we'll take a short break. when we come back, we'll have more reaction, of course, to this fed move. "worldwide exchange" continues right after this.
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japan's prime minister, shinzo abe is expected to raise consumption tax 8% next april as planned. we have the story from tokyo. hi, yukako. >> hi, ross. prime minister shinzo abe is set to raise the nation's consumption tax rate to 8% from the current 5% next april. finance minister taro asos has said to generally set the proposal to cut corporate taxes.
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abe will announce his decision on october 1st. the nikkei is reporting that corporate tax breaks is the to come in two phases. step one, the special reconstruction tax will be scrapped by 2014, one year ahead of schedule. in tokyo, for example, the tax rates all falter around 35%, down more than two percentage points from current levels. the second phase scheduled to be in fiscal 2015 or later is to lower the corporate tax rate to the level similar to those of other advanced economies. that, however, could prove difficult to agree as a 1 percentage point tax cut translates to tax revenue. that's all from the nikkei business report. back to you, ross. >> and sticking to japan, the trade month of august was an extra $16 0 billion yen despite
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exports falling up close to 15% on the year. japan continues to face some steep energy import costs. steven short is still with us. what are your view owes japan? how do you take the news that we are now going to get the consumption tax? >> well, it's good news because it's a critical element of abe-nomics and the strategy to survive long-term growth. the monetary stimulus, the fiscal stimulus, that's done the job of boosting growth in the short run. but japan still faces a daunting medium term fiscal challenge and raising the consumption tax is an ingredient of facing the debt burden that japan faces. >> you're not afraid that it's happening too early? i fully agree with you that the fiscal situation has to be addressed. on the other hand, having had two quarters of solid growth, isn't it a risk that you're
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actually kill this recovery too early by hiking the vat rate already for the next year? >> yeah, that is a risk. but i think it's a risk the government has to take because by our estimates, public debt to gdp burden is going to hit 240% of gdp this year. and if markets aren't convinced that the government has the wherewithal to advance with these difficult challenges, at some point investors will lose confidence, bond yields will soar and that itself will make the fiscal challenge even more difficult. so i think they've got to go ahead as planned in this case. >> do you think in the background also this current account deficit plays a role which in the future could create higher dependency on when i say foreign capital within the foreign bond markets to create a spike in bond yields?
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>> it could. but i think, you know, our view is that the trade balance and the current account position will turn around. i think we're seeing some of the typical j curve effects from the yen's rapid depreciation in the short run raising import costs. to on me, the number that was encouraging today was the export number showing i think it was 14.7% year on year. and that's upward trend in exports showing that the yen weakness is helping to boost exports along with improving external demand. so that's really what we're watching more than the deficit, per se. >> all right. steven, good to see you today. thanks very much indeed for that from bbva who is going the leave now. just a reminder what's on the agenda tomorrow. india's new central bank government will need to balance rising inflation to spur growth. the first policy decision led barrage rat name.
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mr. kuroda will give a speech in tokyo. shanghai, hong kong, taiwan and south korea will be closed for a hot holiday festival. on another note, it's also national talk like a pirate day in the u.s. we've been asking viewers what would ben bernanke say if he was a pirate? i think it's just an sclus to see him in a pirates uniform. the smart knight has tweeted, argh, twitter my tapers. nathaniel tweeted arrr, taper be not set sail with the flying dutchman tis of on yet says i. >> if you want to get in touch with us,
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worldwide@cnbc.com,@krns wex or direct to me @rosswestgate. standard and poors warns it could cut the country's credit raising saying lisbon's shortfalls in meeting its bailouts meetings the provision of the trajectory of the country's debt. yields have risen back above the 7% 4re68 which is seen aus unsustainable. the european commission has warned cypress that its banking sector still pose aes major threat to the stability of the economy. in the first review of such is a 10 billion euro bailout. the government was pushing ahead with the necessary reforms and cuts in public spending. but both the commission and the imf have said separately the bad loans will increase and bank deposits will continue to shrink despite strict capital control. meanwhile, the italian government is expected to unveil a fresh set of measures designed to attract foreign investments. they want to introduce tax
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incentive, consultation and fewer hurdles for setting up a firm. it's called destination italy. and senators meanwhile have voted down a motion by the party of sylvia berlusconi that sought to stop his expulsion from the upper house of parliament. earlier in the day, they made an emotional plea to the italian people telling the nation he will always be at their side. berlusconi says he will remain in politics even if he's expelled from the senate and that he will relaunch its original party. it doesn't look quite real, does it? >> i was wondering, is it really him or is it the berlusconi -- that he maybe try toes sell from his commercial. >> yeah. a good licensing deal on the berlusconi profit. why not. it may be that he's now expelled
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from parliament in a month or so as it goes long. italian yields are back above spanish yields. but as you were saying earlier, we're not worried at the moment. is that not a falls false realtor is it based on things not breaking up? >> listening to the other news about portugal, about cyrus, obviously, the news is there still there for the euro crisis to come back and start creating all kinds of problems again. so it is too early, really, to declare a victory and say, europe, we dealt with it, it's all good and we're heading towards a bright future. it's way too early. but you have to realize in all this sentiment in markets is a crucial variable. for as long as whatever the reasons, global capital markets are willing to look at this with a sort of constructive approach that actually increases the probability that the crisis will
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not return. it's clearly clear better. >> not with the economics, necessarily, of getting better. they're slightly better than they were. >> you clearly have a cyclical pick up in the south. that is actually quite amazing pap bit comparable to what we've seen in the uk. really an amazing period of three, four months in which all data started to improve. and the big question, of course, is that enough to overcome some of the delays on the structural side. despite the news here about creating easier business, italy is not reforming. it's completely flat lining both on the fiscal and the reform side. >> the degree to which data
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surprise is higher in europe than it is in the u.s. and for the time being, there is, of course, an opportunity to sort of ride the wave. sentiment is in that direction. it might change again. but for the next couple of months, i think europe is the base. >> we're going to get another slot with you. still to come, "worldwide exchange"@cnbc.com. that's where it is. how did investors get the fed decision so wrong? we'll take a closer look at the reasons behind bebernanke's mov and what it means for the next month or so, as well, for global investors. [ male announcer ] these days, a small business can save by sharing. like carpools... polly wants to know if we can pick her up. yeah, we can make room. yeah. [ male announcer ] ...office space. yes, we're loving this communal seating. it's great. [ male announcer ] the best thing to share? a data plan. at&t mobile share for business. one bucket of data for everyone on the plan,
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you're watching "worldwide exchange." i'm ross westgate. a recap of the headlines today, the fed surprises everyone by deciding not to taper its bond purchases. ben bernanke points to continued strains in the economy, but leaves the door open for future moves. >> the data confirm our basic outlook. if we gain more confidence in that outlook and we believe that the three-part test that i mention dollars is indeed coming to pass, then we could move later this year. >> stocks in europe rally.
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the dax hits another record with basic resources leading the way. this after gold initially striekd by more than 4 ers off the back of the fed. and the no taper move translates into big moves for emerging markets. currencies like the rupiah, rand and rupee rise. and more protests are expected in greece oofr a murder of a 34-year-old rapper and activist spark violent clashes. >> it's global surprise to many in the fed's eye not to begin tapering and not to cut back just yet its massive bond buying program. in its statement, the fed cited
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tightening financial conditions that could hurt the u.s. economy and labor market. and the central bank cut its growth forecast for this year for the third time. although it still expects a tick up in 2014 and '15 and believes unemployment by then could fall below 6%. as far as u.s. futures are concerned, big moves up. the dow, 147. the s&p up 27. the nasdaq closing up at a fresh 13-year high. right now, the dow is called up, what, another 50 points above fair value. the nasdaq at the moment is 10 points above fair value and we're nearly 6 points above fair value for the s&p, as well. european equity markets started off strongly on a front foot this morning. we're not quite up at the session highs. the ftse down yet. 1.3% up right now. zex ra dax up 1.2%. cac 40 up 1% and the ftse mib up 1.3 the%, as well. the dollar index, that has
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boosted gold. copper up a little bit. and slim gains for brent and nymex. 110 and 108. we saw moves during the u.s. session yesterday, as well. the move on the dollar has been spot, but of course by a move down in yields in treasuries, ten-year treasury yields at the moment, 2.7%, just above the 2.67% we hit on wednesday. 2.86% was the yield before the fed statement. and remember, we were just over 3%. of course, just after the employment report a couple of weeks ago. gilt yield, they were at 3% post the minutes yesterday. 2.875% this morning. we had the first bit of weak data out of the uk for some time. retail sales declining in august from a very strong july, as well. now, those yields on the u.s. market treasury yields having an impact on the dollar, as well. euro has been up to a 7 1/2 month high against the greenback today. 1.3559 is where we stand.
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the dollar/yen is stronger. we did get down to dollar/yen, arou around. lower risk should mean the lower dollar, but it's also risk positive. that's why the yen is suffering a little bit. we were above 1.61 earlier which is an eight-month high for the pound against the greenback. that's where we stand right now in europe. to recap all the action in asia, here is sixuan in singapore. >> thank you, ross. the no taper move sent the greenback lower, asian markets higher and some of these emerging markets soaring. the nikkei 225 closed out an eight-week high, helped by financials, real estate and resources counters. shanghai, taiwan and south korea is out of action today for the autumn festival. so happy moon cakes. and the hang seng is trading up against a public holiday tomorrow, ending higher by 1.7%. it has mow recouped all the losses as it may when bernanke announced tapering.
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in the meantime, india, indonesia and the thailand market are all making big jumps. while all the emerging market currencies are gaining ground against the greenback, india's rupee, indonesia's rupiah and are higher by more than 2%. japanese markets, the jewelry shops all rallied, given the fed surprise. in australia, gold stocks clocked in double digit gains. kings gate and ajacer gold soared more than 15%. stand charts higher by over 5%. back to you. >> all right, sixuan, thanks very much, indeed, for that. as we've been saying, generally a huge surprise for global investors, but why did markets get it so wrong?
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steve liesman has been taking a look behind the fed's move. he filed this report from washington. >> ben bernanke and the federal market committee surprised markets in a big way today by not reducing the stimulus it's putting into the economy, maintaining its asset purchases as $8 a billion despite market expectations that it would begin reducing its today. the federal reserve chairman in his press conference offered three reasons. first, they don't have confidence in the economy that it will last. second, that financial conditions, the rise in interest rates could hamper growth in the future. timely, fiscal restraint, the idea that there could be a big debt ceiling debate swooped the fed into thinking now is not the time to reduce that stimulus to the economy. but it was clear in the press conference that the fed chairman was very, very concerned about the rise in interest rates. the other factor which was at play was an unwinding of excessively risky and leveraged
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positions in the markets and insufficiencies of liquidity in some cases meant that those unwindings led to larger reactions in prices and rates than might otherwise have occurred. now, the tightening associated with that is, to some extent, unwelcome. but on the other hand, to the extent that some of the riskier, more levered positions have been eliminated, i think that makes the situation more sustainable and reduces at least the risk that there will be an overstrong reaction to further announcements. >> all of this begs the question for investors and the nation about when the conditions will be right for the federal reserve to taper. it could be after the debt ceiling debate and the government shutdown is potentially avoided. but here's what he said when asked when he might indeed reduce the stim use husband. >> if the data confirm our basic outlook, if we gain more confidence in that outlook and
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we believe that the three part test that i mentioned is coming to pass, then we could move later this year, we could begin later this year. but even if we do that, the subsequent steps will be dependent on continued progress in the economy. so we are tied to the data. we don't have a fixed calendar. >> finally, i asked the fed chairman about his plans, whether or not he quit and was he fired and would he serve and he said he would not answer that question. but we did suggest we might get information on his future plans soon. back to you guys. >> steve liesman in washington summing it all up. valentine is with us head of strategy investment management since the first part of the program for today. valentine, it leaves the point here where we heard bernanke talk about market rates going up. but look, 140 basis point rise in ten-year yields since may when they first began aannounced they might begin this whole process. it does raise the question about
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when can we ever move away from this unbelievable liquidity that we're pumping in? i mean, when is the economy ever going to be strong enough to do without the drug? we can't now deal -- we can't deal with the moves it causes. >> i think what he wants to prevent is let's say a cold turkey reduction of the stimulus or for a still very weak economy in level terms, in the degree of activities still well below where he likes it to see. and that is most clearly expressed in the level over employment, well over what you would describe as being an equilibrium level. so he wants to make the ride as smooth as possible and don't create a shock that while a recovering patience is greatly moving in the right direct still kill tess patient in this very sort of -- process. i think that's the key and that is very difficult. we've never been here. it's very difficult to see how
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we will reverse this without an occasional shock along the way. >> it's interesting. ambrose evans has written in the telegraph today that the fed has recoiled from a 1937 tightening. roughly comparable to the rate of loss we saw during the great recessi recession. it's even remarkable they should have been thinking about phasing out life support. it's an interesting take. >> if you look at other numbers is also a remark. in the en, you look at phenomenal gdp growth. over the last two quarters, it was only 3.1% in the u.s. economy, which is really the lowest level since the 1930s. obviously, also bernanke being very well aware of the dynamic in the 1930s having studied that. so i think all of these elements are in the back of his mind and making him cautious to move too quickly.
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where does it leave global investors and markets with communication? clearly, there is a problem, right? so are we now going to get a lot of volatility? >> we're going to get more volatility. that's for sure. clearly, there is now tw side of risks to these decisions, rather than just risk in the direction of more tightening. so it's a bit more uncertainty. on the other hand, there is clearly a hidden message that the fed is committed to allowing growth to strengthen and foster further. so i think to that extent, there is an underlying message which is constructive for risky assets. >> the risk on? >> risk on. >> valentine, thanks for that. good to see you today, head of strategy at img investment management. still to come, could germany's anti-euro party be a wild card in this weekend's forthcoming elections? we'll have a report from berlin in just a few moments.
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a recap of the headlines. stocks rally with especially strong gains in emerging markets. and jpmorgan could finally settle its london whale case today with types potentially topping $900 mlg million
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according to the "new york times." meanwhile, the german campaign is in the final stages and recent polling suggests a late surge of support for the anti-european asd party. annette is on the campaign trail in berlin. annette, the polls now suggest they might get 5% of the vote. this would give them seats in the parliament. how will that upset the rest of the counting and angela merkel's coalition plan? >> ang angela merkel's coalition plan is rather unlikely if they attract that much of voters. because right now, the polls are showing that the ruling coalition is not going to have a majority on election day. at the same time, it really looks like a grand coalition because, of course, the afd or the anti-european party is not a
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coalition partner for angela merkel's cdu, but for the implication and more what could happen after the election. thank you very much for coming here. is angela merkel really keeping up her european policy as well after the election according to your opinion. >> to my mind, her speed of integration will slow down significantly. now she goes more and more towards a transnational eu which means bilateral agreements between parliaments, bilateral agreements of governments with the eu commission. but the eu commission only is a marginal actor in it. they are dealing with reforms.
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>> so if that was because they was to keep the uk in? >> this is one argument because the uk is the promoter of more reforms and this is her main emphasis is to go for more competitiveness of the euro area and she needs allies for that. sovereign states are tired with all the austerity and reform measures. >> so we were wondering what actually is behind that term merkel-nomics. what do you think, what does she stand for in economic terms? >> as i said, she emphasized very much international competitiveness of governments as a condition for success of -- for a long time success of economies and on the other hand, she's still on austerities. another issue, of course, is banking union. there she is speeds up, slows down, speeds up due to election terms. >> and after the election, it
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will be slow down again or what is your take? >> yes. i think the banking union will stop, there will be some sacrifices from the german saver. it's clear that the savings industry and so on are totally against the common desupposer insurance and even for the restructuring mechanism, germany has always been keen on the treaty. and demands treaty changes as a condition of all this. >> so what are you hearing? are we going to see another greek haircut regarding for the bailout for other countries? do you think this government, the new government will sign up for that? >> yes. at the moment, nobody is allowed to speak about it. but i'm a scientist. i'm allowed to do this. and i clearly reckon with such stuff coming very soon. but after the election, as you said. and the losses are maybe hidden on the balance sheets of the ecb. and this has been done intentionally because the german
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voter was not award of this before the election because it's a very complicated stuff. >> thank you so much. so, ross, what we were discussing quite often already, the ecb might end up the big dumping ground for all this sovereign debt titles, which probably will lose some value. with that, back to you. >> yeah. merkel-nomics, did you make that one up? >> yes. >> well done. creativity. creativity on the front line. we like that. >> i think i'm not -- i'm not -- i'm probably not the only one who said that already. >> well, i don't know, but we're taking that and it will be on cnbc.com fairly shortly. merkel-nomics. annette, thank you for that. we have full coverage of the german elections from berlin and athens as well. there is a picture of our team that's going to bring all that coverage for you.
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we will be in greece, as well. violent clashes have broken out after a 34-year-old rapper was killed. the far right party has denied any involvement in the killing. his death has drawn widespread condemnation from greek leaders. we'll take a short break. still to come, is bernanke right to be somewhat concerned about mortgage rates? we'll get a check on the u.s. how is housing market when we come back. if you have the audacity to believe in straight talk, not double-talk. if you have the nerve to believe that in a puzzling financial world, clarity is king. [ man ] if you believe nothing beats a sit-down for knowing where you stand. [ male announcer ] join the nearly 7 million investors who think like you do: face time and think time make a difference. join us. [ male announcer ] for 90 years,
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this is what membership does. yesterday, ben bernanke admitted he's worried about the u.s. housing sector. fed chief says the central bank was waiting to see what impact high rates would have on the mortgage market. >> we are somewhat concerned. i don't want to overstate it. but we do want to see the effects of higher interest rates on the economy, particularly mortgage rates on housing. so to the extent that our policy makes conditions -- our policy decision today makes decisions just a little bit easier, that's desirable. >> now, the fomc meeting conclude hours after u.s. housing starts for august came in less than expected.
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joining us from florida is sherry and the ceo of the group and author of "foreclosure nation." nice to see you again. what impact has this -- clearly the fed chairman spoke about the concern about the rise in mortgage rates. what impact has it had? >> well, it's had a long standing impact because of the uncertainty moving forward. we know with rates as low as they are, they have to go up. and every time there's an announcement here, we see hiccups in the market and increases in the past in mortgage rates. in the long-term, though, ross, the thing is that mortgage rates are still historically low even though they're higher, at the highest point in the last two years. and, of course, mortgage rates are going to impact how much home folks can buy. not necessarily whether or not they can buy a home altogether. and the alternative to buying is still renting which for many folks is still a less attractive alternative. was going to have a bigger impact are the new rules that begin next year that address mortgages, new mortgage
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originations, because those will determine for many folks whether or not they can buy at all. >> yeah. i mean, hang on, could you -- i'm just getting into that because are they going to tie up loan to values and qualify kaegzs, proof of income, that sort of stuff. >> right. right. these new construction numbers are risk selecting. we see single family homes, builders are building more single family homes again than multi-family, reflecting some of the pent up demand that we've had in our market for a long time. buoy but we're still in an interesting balancing point. we have fewer household formations, high vacancy rates and a bit of a housing hangover that we see particularly since investors are buying in those hardest hit states where they think they can make the money and builders are still avoiding those states. >> we're expecting obviously more housing data on today's agenda in the united states. in addition to the weekly jobless claims out at 8:30 eastern and the current account for the current account figures. we've got august existing home
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sales out, due at 10:00. now, sales expected to drop by 276% to an annual rate of 5.25 million. how does that compare, you know, historically? >> well, we're in an interesting time right now. and it all has to do with inventory. when the bubble bursts, of course, we ended up with a million and a half extra homes that no one wanted to buy because no one knew where prices were going to bottom. eventually, prices bottomed, investors got in the market again and prices have been rising way faster than they should be. not in lock step with incomes and wa average people can afford because it's been in investor driven market. now we're at the point of impact point where the roi, where the price res right now is not good enough for most investors. a lot of these funds are seeing that the return on what they thought was going to be this great scattered rental housing market is not as high as we thought it was going to be. so with that, we'll see
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inventory billed again and prices will probably dip a little bit eventually, but, you know, at least soften for now. prices are not going up aas fast as they have been going and same thing for sales. >> yeah. and finally, the smaul smaller home builders, any signs that they're thinking of coming back in or not? >> that's an interesting question because, on the front lines, what i see with clients in the real world is the small guys, a lot of them got wiped out when the bubble burst and they are just now getting back into the game. they're just now being able to borrow again. a lot of those folks worked themselves into positions doing workouts for banks and they become -- people after the bubble burst. that game is over, as well. so we're seeing smaller, local builders getting back into the market which is a wonderful thing because they're very sensitive to what the local market is demanding. >> sherry, good to speak to you this morning. thank you for joining us.
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cherylry olefson ceo of the carnegie group. still to come, oracle said it's cautious. we'll hear why the company's share price is being hit. as we do so, a reminder of where futures are trading. s&p down at fresh record highs. we're implied higher again at the open this morning.
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this is "worldwide exchange." i'm ross westgate. the fed surprises nearly everyone by deciding not to taper its bond purchases. ben bernanke points to continued strains in the economy but has left the door open for future moves. >> the data confirm our basic outlook. if we have more confidence in that outlook and we believe that the three-part test that i mentioned is indeed coming to pass, then we could move later this year. >> stocks in europe continue the global rally. the dax up with another record. basic resources leading the way, as well. gold initially priced in by more than 4%. no taper move translated into the biggest move for emerging markets. currencies like the rupiah, rand and rupee battling back strongly in countries surging in equity is like thailand and indonesia.
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jpmorgan is reportedly close now in a deal with regulators. the fine could top $9 the 00 million. >> you're watching "worldwide exchange," bringing you business news from around the globe. >> all right. a very good morning to you. if you've just joined us in the united states, we were measuring global reaction to the fed's no taper move. we saw yesterday u.s. stocks finishing up at record closers for the s&p, the dow up 20, nasdaq futures indicate we will extend that move into the session this morning. the s&p currently around 8 points above fair value. the nasdaq at the moment, about 13 points above fair value. these futures are extending their gains as we get closer to that u.s. open as well.
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as far as european equities are concerned, we're now back up to about the best levels of the session. the ftse up 1.38%. xetra dax up 1.2% at 8,739. the ftse mib up about a 1%, as well. and we're keeping our eyes on commodities. the dollar index down at seven-month lows. euro/dollar up at fresh highs. that has helped commodities, as well. spot gold, 1364. copper is higher this morning at 333. and silver is up at 6.5%, as well. and we've seen nymex rally, as well. on the bond markets, yields have been coming down. ten-year treasury yields, though, not during the european session, we hit a yield of 2.67% late yesterday, which was down from 2.86%, which is before the fed statements. so big moves down. we were, of course, yielding 3% post the employment report a couple of weeks ago.
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elsewhere, gilt yields lower, 2787.%. gilt yields yesterday were above 3%. for the first time, we've had weaker than expected data out of the uk. and the biggest move on the currency space has to doubt been emerging market currencies, as well. the indian rupee, 61.85. the rye pea ya having big moves, as well, in the last 24 lours and the turkish lira, as well. what have the fed made of the fed's move or not move? here is what some of you our guests have been telling us in the last hour or so. >> i think the trade is -- well, you want to be sort of long the ten-year area. i think i've got further falling yields. i think to see the curve flattened in the u.s., i think you can probably see the ten-year u.s. outperforming
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bunds in the rally. >> gold up 3%. you know, this policy is going to get growth, which i think is pretty clear. commodities should do pretty well. so i think it's a very clear signal from the fed that they want to see more growth. that obviously translating to better global growth. it should be good for the commodities complex, of course. >> i particularly like some of the things going on tonight. the power company, they produce enormous amounts of peak power and they're going to start. at the moment, the way the iceland monetizes the power is exporting big blocks of aluminum. >> all right. so that's the reaction to the fed. we'll talk about it more, as well, in the next half hour. before that, our fiscal first quarter profit was up 8% topping
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forecasts. the revenue fell short of estimates for the third quarter. the firm is being cautious with its outlook, as well, for the fourth quarter. forecasting revenue to the decline of 1%. the chief operating officer cited uncertainty in the economy. she's not certain when the company will close some deals. oracle stock in frankfurt is down 2%. that's something of an underperformance on a day when global markets are up 1%, 1.5%. joining us from cnbc hq in the states, daniel ives. daniel, good to see you. it's a bit of an underperformance right now by oracle stock. what's your reaction to what you've heard? >> yeah. i mean, it was not exactly a great quarter. i mean, a slight rebound from what we saw last quarter. but the guidance will be the focal point this morning.
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soft and what the street was looking for. and i think it continues to be an uphill battle for oracle as they try to reaccelerate growth in this move to the cloud, which they were a bit late and it's kind of hurt them in the top line. >> how competitive is it out there with smaller companies offering, you know, softer and internet based products at cheaper prices? >> that's a big issue. i mean, competition has continued to increase. but the big thing here is that oracle, they were late to the cloud. they've done a good job over the last six to nine months in terms of product cycle, hiring a lot of sales, guys trying to get back some of that share. but it's a proven stock over the next six to 12 months if they're going to be successful in this move to the cloud as well as some of their hardware success. >> the other thing is, we had this barclay's report released yesterday. it indicates corporations expect flat spending on i.t. in the second half. originally, there was going be a spend. so the pie is going to stay the
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same size. so that competition again will get harder. >> well, that's a good point. also, if you look at -- if it's a bifurcated spending environment, maybe you look at big data, cyber security, cloud, some of those areas growing 40%, 50% where oracle is playing, it continues to be a tough climb, it's hard to get budget dollars. and that speaks to what oracle, you know, talked about last night. but you're seeing it reflected in the guidance that, you know, there could be brighter days ahead, but it's definitely going to be a tough new quarter to kind of get back there. >> are you confident in the product cycle? >> i am. i mean, look, over the last decade, it's been hard to bet against oracle. they continue to reinvent themselves. i think some more acquisitions could be down the road. this move to the cloud is definitely what they need to do. they've done a good job hiring.
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you know, call it 4,000 sales over the last two years. so then the product cycles real. now it's about execution. that's been the issue. there have been a lot of missteps in terms of execution. now it's getting their act together. they have talked the good talk, now it's walking the walk over the next year to get back investor confidence in the name. >> where does this leave you with your view of the rest of this sector, the software sector? >> well, the software sector especially, i think over the next four to six months has some pretty strong tailwinds just as you look ad at cloud, big data, security, where a lot of these guys play into. i think oracle, you know, even though it is not a great quarter, overall spending environment is slightly improving. but i think tlls pockets within software that are seeing tremendous growth. and that's where a lot of investors are putting their money. especially going into year-end
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where software is a strong performer. >> daniel, thanks for speaking to us this morning. we'll take a short break. still to come, jpmorgan is raising big fines. some suggest the bank could announce a settlement with regulators on both sides of the atlantic today. we'll have more details, straight ahead. we went out and asked people a simple question: how old is the oldest person you've known? we gave people a sticker and had them show us. we learned a lot of us have known someone who's lived well into their 90s. and that's a great thing. but even though we're living longer, one thing that hasn't changed much is the official retirement age. ♪ the question is how do you make sure you have the money you need to enjoy all of these years. ♪ like carpools... polly wants to know if we can pick her up. yeah, we can make room. yeah. [ male announcer ] ...office space. yes, we're loving this communal seating. it's great.
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cnbc has learned that chrysler is set to file its ipo papers any day now. it would put its main shareholder against the trust fund affiliated with the united autoworkers union. the trust is unhappy with what's been offered for its stake. it's urging marconi to take chrysler public. else wrb, shares in vivendi are trading shares slightly lower after a court halted its deal to sell its majority stake. stephane has the details for us in paris. stephane, what's their concern? >> back in july, vivendi agreed to tiff sell most of its stake in active vision.
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last week, a minority shareholder of activision claim that the deal could not be completed without the votes of the shareholders. in a statement, activision says the company remainses committed to the transaction. the video taim gamemaker is exploring all the steps that it will take to make sure that a transaction can be completed as quickly as possible. one of the option will probably be a vote of the shareholders. vivendi believes that it's just a delay, that the operation is not canceled, but it's going to probably delay the reshaping process of vivendi, which is planning to split its activities on the one side with the media business and on the other one, the telecom business. vivendi recently launched a process to study na that
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spin-off possibility. while not expecting any decision before the next year, but now vivendi is focused on activision. because of that court decision yesterday, we could see a delay. that's the reason the stock is now trading lower on the cac 40. it's the second biggest decliner of 1%. over to you. >> thanks for that. meanwhile, take two is toefth a successful completion of its latest level. the long awaited release of grand theft auto v, the software firm announced that it raked in nearly $800 million in the latest game in the franchise on just the first day of its release on wednesday. amazing how the graphics have come along. stock up over 9% in the last three months ahead of that release. a reminder of the headlines today, the fed surprises by capping stimulus. it's kicked the taper can down the road. global stocks rally in response,
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especially strong gains in emerging markets. and jpmorgan could finally settle its london whale case with fines potentially topping $900 million. this according to the "new york times." mean wile, cnbc has confirmed that wells fargo plans to cut another $1,800 mortgage-related jobs. those are on top of the 3,000 cuts announced earlier this summer. rates have risen and new home sales failed to offset that decline. wells fargo says it's provided 60 days' notice to the employees and will try to retrain as many people as possible for other positions. wells fargo down 0.5% in frankfurt. and jpmorgan may begin to put the costly london whale scandal behind it. what are the details? how might it pan out? seema moody has it for us from
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cnbc hq in the states. >> jpmorgan is reportedly expected to announce a deal with u.s. and uk regulators today over the london whale losses. the "new york times" says the fines could top $900 million due to currency conversions. the s.e.c. and the office of comptroller and the currency said, and the uk's financial authority are expected to charge jpmorgan with poor controls surrounding the bad derivative debt. the settlements were worked out with each individual agency for several actions. reports say the regulators worked together to coordinate today's announcement. as far as the settlement, reports say jpmorgan will make a rare admission of wrongdoing. the occ will receive the bulk of the fines, about $300 million. last year, a senate investigation found jpmorgan misled occ competitors about the risks posed by the bad straights. the bank is still wrestling over
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the trades that cftc is probing whether jpmorgan's london traders manipulated the derivatives market. the federal prosecutors and fdi are gathering evidence that could result in criminal charges against the company. a grand jury indicted two former traders this week for their alleged roles in hiding the losses. checking shares of jpmorgan in europe, i think they're up just fractionally. ross, back over to you. >> seema, good stuff. thanks for that. have a good day there. we're going to talk about the fed still to come. meanwhile, their decision means that they have an opportunity in india to step up economic growth to 6.5% by march 2014 is. to say the u.s. fed position to hold firm on stimulus has potential to add around 50 basis points of growth in the near term. the rupee has risen sharply against the dollar against in the 24 hours, as well. the emerging markets are up strongly.
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so still to come, the fed's decision not to taper its bond buying program has sparked a debate. is the central bank right or wrong in delaying the inevitable? see you in a few moments. [ male announcer ] this store knows how to handle a saturday crowd. ♪ [ male announcer ] the parking lot helps by letting us know who's coming. the carts keep everyone on the right track. the power tools introduce themselves. all the bits and bulbs keep themselves stocked. and the doors even handle the checkout so we can work on that thing that's stuck in the thing. [ female announcer ] today, cisco is connecting the internet of everything. so everyone goes home happy. [ woman ] if you have the nerve to believe
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using data predictively to help power entire cities. so the turbines of today... will power us all... into the future. ♪ okay. we've been make global reaction to the fed today. it defied conventional thinking when it said no to tapering. most economists take the september meeting for the starting point. but the fed chairman ben bernanke says that was never the case. >> yorlg stating that we would do any particular thing in this meeting. what we are going to do is the right thing for the economy.
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>> so joining us from washington is greg ipp, the u.s. economi c economicics editor at "the economist." why did we all get it so wrong, greg? let's fess up. >> back in june, the chairman said the intent of the committee was they were going the start this process by tend of the year and hopefully done by the middle of next year. that gave them three opportunities, september, october and december. bernanke is certainly right, they never promised september. so no moving was consistent with that guidance. while he didn't disavow the guidance he gave us in june, you certainly didn't reaffirm it. he talked about the possibility of moving by tend of the year and he backed away from the importance of 7% as the unemployment rate that would indicate that that was a time they wanted to be done. now, the point is they've always said that dependent on the data and a variety of other things.
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some of the market. before what he had to say, and i suspected that was why they downgraded their forecast next year, pushing out the tapering was the logical response to try and take back some of the financial tightening that they inadvertently caused. >> which they caused. and that's the point, right inspect they caused the tightening in the first place. this is a -- >> i think -- >> put us in a weird place because the -- the indication of that is we can never really tighten, we can never move away. markets will good binary. they'll immediately go to a long-term logical conclusion. how do we know get out of it? >> it does set up a strange unstable equilibrium. the market rallies, the fed
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decides to taper and then they chase their tails around and around and around. look, i think when you examine the internal dynamics of the market in the last few months, and the fed has done this, they believe that only a small portion of the sell-off in the bond market reflects a repricing of what the market will do. by far, the most contributor is a slight risk. there has been a huge amount of money around the world invest in strategy assumed that qe would never end. and there's been a wholesale rush from the exit. bernanke referred to that possibility yesterday, saying that there has been a lot of unwinding of some of these speculative positions. in that sense, the sell-off that we've seen in the last few months is more than just a reaction to what the fed has seen. it's partly been an unwinding to what has troubled some people at the fed. in that sense, i would not lay all the responsibility at the fed's feet. and i alsoly that if the market finds a new equal lib ree yaum and if that equilibrium seems to
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be consistent with a modest improvement in the data, that would give the fed the green light to once again start the tapering process. but when that will be, i guess we don't have a good idea right now. >> will it be -- could it be after bernanke leaves? some people say, look, why would he taper in his last meeting? is that a bogus argument or not? >> you know, i think that perhaps at the back of his mind, he probably had a desire to get this process started before he stepped down to give him sort of a sense of koes your that he had seen this whole process through from start to finish. but overriding that was a desire first and mr most to get it right. frankly, he put forward a number of in my view very good reasons to hold off for now. number one, the job market data has perhaps not lived up to expectations or the gdp data. number two, you've got the fiscal problems still hanging over the economy. and finally, the fact that the bond market has sold off so much that that was a genuine impairment to the outlook for
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growth. >> greg, those are all good points. why did almost no one -- almost no one say, those are all good points the fed isn't going to move? >> that's a very good question. i saw a statistic recently that it had been about two months, if i remember correctly, since we had heard from anybody in the leadership position at the fed talk to us. i think the last time, in fact, may have been the fed chairman's testimony in july. that's an awfully long time to go without any guidance from the maybe spokesman for the fed. and so part of this may just have been lack of guidance. it might be would i wise for the fed to not allow so much time to elapse without giving the fed an update on their thinking. >> and maybe they didn't generally know weight was going to do because he made the decision at the last moment. so maybe that's one of those things. greg, the debate is going to continue. tlanks for joining us, greg ip,
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from the "the economist." the debate continues here on cnbc. "squawk box" is coming up next. hope you have a profitable day. bye for now.
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good morning. today's top stories, the global markets. stocks soar after the fed surprises investors. not like they didn't tell us they were going to do it, was it, and said no to a taper. >> but in evaluating whether a modest reduction in the face of asset purchases would be appropriate at this meeting, however, the committee concluded that the economic data do not yet provide sufficient confirmation of its baseline outlook to warrant such a reduction. moreover, the committee has some concern that the rapid tightening of financial condition in recent months could have the effect of slowing
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growth, as i noted earlier. a concern that would be exacerbated if conditions tightened further. >> it's thursday, september 19th, 2013, and "squawk box" begins right now. good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. and most on wall street had expected the fade to announce a taper paring back its bond buying program by $10 billion to $15 billion. but not yet said chairman ben bernanke. fomc policymakers tightening a decision specifically in mortgage rates. it blames washington, making note of another congressional showdown on the debt ceiling. >> a government shutdown and perhaps even more so a failure to raise the debt limit could have very serious consequences for the financial markets a
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